Cafe Hayek: Kelo and Just Compensation

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June 26, 2005

Kelo and Just Compensation

Don Boudreaux

Here's the Boston Globe's outstanding columnist, Jeff Jacoby, on the odious Kelo ruling.

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Speaking of Kelo, what compensation is "just" for the homeowners in New London, Connecticut, whose property is being stolen by the government? The market value of these properties before Pfizer and other private companies set their sights on them? Nope. That figure is far too low.

The government is very sure that its theft of private property will generate ample economic benefits to citizens at large, as well as increase the City’s own tax revenues. (As Justice Stevens put the matter in his opinion for the Court majority: "The City has carefully formulated an economic development plan that it believes will provide appreciable benefits to the community, including – but by no means limited to – new jobs and increased tax revenue.") So why not base the calculation of the just compensation (owed by the thief-politicians of New London to their victims) on the City’s own estimate of the dollar value of these "appreciable benefits" that its thievery is expected to yield?

That is, if the City expects that its thievery will yield $X million in economic benefits, just compensation (given that the theft now enjoys the Supreme Court’s approval) is approximately .95 ($XM). Let the City keep about five percent of the additional value it expects to be created. Given current low interest rates and the fact that the City (ostensibly) is a not-for-profit outfit, the City should be quite content to keep a full five percent of this booty.

I thank my neighbor, the insightful attorney Ed Grass, for this suggestion about the proper magnitude of "just compensation" in Kelo.

Posted by Don Boudreaux in Law, Property Rights | Permalink